Even in China’s wealthiest big cities like Beijing, Shanghai and Shenzhen, the average white collar worker earns less than $1,400 a month, or under $18,000 a year including a Chinese New Year bonus.
While urban professionals in China may earn significantly less than their peers in Seattle or Sydney, countless consumers happily fill Starbucks cafes sipping $5 lattes. Many are prepared to pay ten times the price for a pack of Weet-Bix cereal biscuits than they would in Australia.
With your Westerner hat on, there’s a good chance that you’d be scratching your head wondering how consumers earning relatively low incomes, living in some of the most expensive cities in the world with reputedly high savings rates, are still finding the money to pay for expensive imported milk or premium foreign apparel. How could 120 million afford to fly overseas last year and spend the most per traveller in almost every country they visited?
For a start, it’s not a good idea to view Chinese consumer behaviour with Western assumptions. The differences in how Chinese choose to spend their discretionary income should illustrate just how distinctively a consumer in Chongqing thinks and acts relative to one in Chicago. It is a matter of priorities.
Chinese spending priorities were once heavily weighted towards projecting status – showing the masses that you had successfully transitioned from the countryside to the city and had the shiny phone, watch or handbag to prove it. While Beijing’s anti-corruption stance hasn’t helped, the Chinese appetite for luxury goods was already showing signs of waning simply because they were so common and could be easily faked.
Factors such as health of self and the only child/grandchild have become the top priority for many Chinese, and consumers will go without other things to pay the premium for such products. Experiences like overseas holidays, going to the cinema or downloading smartphone games are all becoming high on the list of desires.
To a degree, status still plays a part in many purchase decisions – knowing the healthy foods, fungus or even shampoo to buy, using the same products as a celebrity, or signing up to a gym or yoga classes demonstrates sophistication among peers. Posting exotic holiday snaps on social media or getting high score on a mobile game can also bring street cred.
To remain relevant with your target market in China, ensure your marketing, branding and positioning appeals to their changing priorities and desires. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.